What happens if the bank won’t refinance our loan after the end of 7 year ARM? Loan is current…?

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We had a bankruptcy a couple years ago and because of that, the bank won’t refinance us? Our mortgage is current and always has been, we reaffirmed the loan and have paid on time. We also have a second mortgage (home equity loan) but even with that, our house is not underwater, we have some equity! What are we supposed to do if the bank won’t refinance… Do they really want to foreclose and take the home back in this terrible housing market and poor local economy? Something seems wrong with this scenario! Again, we are current in our mortgage… Any advice would be appreciated…
I apologize for my ignorance, I was under the impression if I did not refinance, I would have to pay balance of the loan which is about 95K. So if I understand right, they will just raise my interest rate if I do nothing?

  1. Reply
    May 3, 2011 at 1:37 am

    If your lender won’t refinance, your only option is to look for another lender that will. “What’s wrong with this scenario” is getting an ARM in the first place and then piling a HELOC on top of that. It’s just way too much debt – as your bankruptcy would indicate.

  2. Reply
    May 3, 2011 at 1:48 am

    I have not heard any hardship described here. ARM rates are currently lower than what a 30 year rate is, so if your mortgage adjusted today, your rate would likely go down.

    I don’t understand what the issue is. Sure, at a later date the rate could go up after the 7 year period, but you should be fine for now. I suggest you just keep making your payments and try again after the waiting period for the BK has passed. You will then be able to refinance.

  3. Reply
    May 3, 2011 at 1:59 am

    The worst case scenario here is that your mortgage loan would adjust to a new rate up or down. What ever the rate adjust to your lender would send you a letter stating the new monthly payment. You would be required to pay this amount each month from this time forward, or until you sold or refinance the property .

    Normally a bank would have a mortgage only refinance program available to those that have payed their monthly mortgage as agreed.

    It matters not that your home is under water or not. The lender would normally refinance a mortgage up to 80% of the value of the property. An example would be if the appraised value of the property was $ 100,000 then the maximum a lender would lend would be $ 80,000. Under this scenario you might not have sufficient equity to pay off the 1st mortgage as well as the home equity mortgage loan.

    The only other way this would work is if the home equity mortgage loan would agree to become a second mortgage an would be willing to sign a subordination agreement. Even though your equity mortgage is currently a second, with a refinance the equity mortgage would automatically become the first and the refinance lender would become the second. The refinance lender would not be interested in being a second mortgage. Using this method you would not be required to pay off the equity mortgage loan.

    I hope this has been of some benefit to you, good luck.

    “FIGHT ON”

  4. Reply
    Lisa L
    May 3, 2011 at 2:25 am

    I think you are confusing an ARM with a Balloon. The Balloon is the one you would have to refinance. With an ARM you do not refinance, it just has the potential to adjust. Be sure & look at your paperwork & be sure you have an ARM & not a Balloon.

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